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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Electoral Commission, R (on the application of) v City of Westminster Magistrates Court & Anor [2009] EWCA Civ 1078 (19 October 2009)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2009/1078.html
Cite as: [2010] QB 298, [2009] EWCA Civ 1078, [2010] 2 WLR 873, [2010] 1 All ER 1167

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Neutral Citation Number: [2009] EWCA Civ 1078
Case No: C1/2009/0272

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Mr Justice Walker
CO92772007

Royal Courts of Justice
Strand, London, WC2A 2LL
19/10/2009

B e f o r e :

LORD JUSTICE WALLER
LORD JUSTICE GOLDRING
and
SIR PAUL KENNEDY

____________________

Between:
The Queen on the application of The Electoral Commission
Appellant
- and -

City of Westminster Magistrates Court
- and -
United Kingdom Independence Party
Respondent

Interested Party

____________________

Michael Beloff QC and Jasbir Dhillon (instructed by Treasury Solicitor) for the Appellant
The Respondent did not appear and was not represented
Alan Newman QC and Sam Blom-Cooper (instructed by Moreland & Co) for the Interested Party
Hearing dates : 28th and 29th July 2009

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Sir Paul Kennedy :

    Introduction

  1. Having considered the fifth report of the Committee on Standards in Public Life under the chairmanship of Lord Neill of Bladen QC (the Neill Committee Report) the Government produced a White Paper, and Parliament then enacted the Political Parties, Elections and Referendums Act 2000 (PPERA). The statute established the Electoral Commission (the EC) and provided, amongst other things, that political parties should only accept donations in excess of 200 from individuals currently registered on an electoral register. To enforce that provision the statute provided criminal and civil sanctions. We are not in this case concerned with the criminal sanctions, but s.58(2) provides that where a political party has accepted a donation which, by reason of the statutory prohibition, the party is prohibited from accepting, then a Magistrates' Court
  2. ". . . may, on an application made by the Commission, order the forfeiture by the party of an amount equal to the value of the donation."
  3. Mr Alan Bown was at all material times a member of the United Kingdom Independence Party (UKIP), who made a number of donations to that party, and who was entitled to be registered as an elector, but, for the period between 1st December 2004 and 2nd February 2006 his name did not appear on any electoral register. During that period he made sixty-nine donations, totalling in excess of 360.000, but some were of less than 200. The remainder totalled 349,216.
  4. The statute requires a political party which receives the donation to take all reasonable steps forthwith to verify the identity of the donor and whether he is a permissible donor (s.56.(1)). If not satisfied that a donor is a permissible donor a political party can return the donation within thirty days, and only if it fails to do so will it be regarded as having accepted the donation. UKIP did not return any of the donations totalling 349,216 within thirty days, or at all, so the EC on 16th March 2007 applied to the City of Westminster Magistrates Court for an order for the forfeiture of an amount equal to the value of the donations.
  5. In the Magistrates Court

  6. The matter came before Judge Workman, the Senior District Judge (the SDJ), whose decision after a three-day hearing is dated 7th August 2007. On behalf of the EC it was submitted that the only appropriate order in the circumstances was the order sought. The SDJ found it unnecessary to rule in relation to that submission (i.e. as to the width of discretion granted by s.58(2)) but he was "not attracted" by the submission which sought to fetter the statutory discretion. Having heard evidence from Mr Bown, the SDJ was unable to decide whether the failure to register Mr Bown's name on the electoral roll for the period between December 2004 and February 2006 was the result of a mistake made by Mr Bown, or the postal services, or the local office of Thanet District Council but, whichever it was, the SDJ was satisfied that it was a genuine, inadvertent error.
  7. Before the SDJ it was admitted on behalf of UKIP that the party had not taken all reasonable steps to verify that Mr Bown was a permissible donor. It had not at any time between December 2004 and January 2006 checked the electoral roll (which is available, free of charge, to all registered parties), but the SDJ accepted the evidence of the party's treasurer that he had sought (and by inference obtained) an assurance from Mr Bown that he was on the electoral roll. As the SDJ said "in the unusual circumstances of this case that was clearly insufficient".
  8. When rejecting the submission made on behalf of the EC that there should be an order for the forfeiture of an amount equal to the value of all of the donations made when Mr Bown was not a permissible donor, the SDJ expressed the view that Part IV of The Act (entitled "Control of Donations to Registered Parties and their Members etc"), which includes s.58(2), "was designed to ban foreign donations to political parties". As the SDJ found, Mr Bown's donations were not foreign donations. They were made in the belief that they were permissible, by a man entitled to registration on the electoral roll.
  9. The SDJ considered it appropriate to order only the forfeiture of a sum equal to the value of donations received from Mr Bown after a meeting between officials of the EC and the then treasurer of UKIP, at which "the party was aware that Mr Bown was not on the electoral roll". The SDJ made a mistake as to the date of the meeting, which he said took place on 19th June 2005. It is common ground that the only meeting of that type took place later, on 13th December 2005, but UKIP makes no complaint about the order made by the SDJ.
  10. The application for Judicial Review

  11. The statute, in s.59(2) gives a registered political party a right to appeal to the Crown Court but no such right is granted to the EC, so it can only challenge the decision of a Magistrates' Court by means of Case Stated or by means of judicial review. The SDJ refused to state a case, so the EC sought judicial review, contending that the SDJ had (1) erred in law in his construction of PPERA; (2) not made a valid exercise of his discretion under s.58(2) when he refused to order forfeiture of 349,216; (3) erred when giving the date of the meeting as 19th June 2005 and (4) failed to give adequate reasons for rejecting the EC's case. Permission to apply for judicial review was granted on 11th March 2008 and the case was heard on two days in September and October 2008.
  12. Additional Facts

  13. The SDJ made no reference to the undisputed history of relations between the EC and UKIP before the meeting in December 2005, although he was aware of it. As it has always been part of the case for the EC that the history is of some importance I summarise it here before turning to the background of the legislation, the relevant statutory provisions and the decision of the judge.
  14. In 2001 UKIP accepted a donation of 50,000 from Sir Jack and Lady Hayward. Sir Jack was not on the electoral roll at the address provided by UKIP. The EC, in two letters, sought an explanation, and asked for UKIP's explanation of its systems to check that donors were registered as electors and were therefore permitted donors. At a meeting between the then treasurer of UKIP and representatives of the EC the treasurer said that UKIP had added to its internal donation report a request for the electoral registration address of any individual donor, but at some time between May 2004 and May 2006 that request was removed from the report form, to simplify the form.
  15. On 14th April 2005 (four and a half months after Mr Bown ceased to be a registered elector) the EC, by e-mail, asked the then treasurer of UKIP to explain donations, apparently from him, but attributed to two separate addresses, those donations having featured in the party's return (Form RP10) for the last quarter of 2004. There was no reply to that e-mail, despite a reminder sent on 13th May 2005, and the flow of donations continued, so on 24th June 2005 the EC sent another e-mail raising questions about the donations which featured in the form RP10 for the first quarter of 2005. Again there was no response, but the flow of donations still continued and was reflected in the Form RP10 for the second quarter of 2005. That led to a letter from the EC to UKIP dated 5th October 2005 asking the party to check the names and addresses of a number of donors, including Mr Bown, and to provide correct details for each.
  16. Prior to December 2004 Mr Bown had been on the electoral roll maintained by Thanet District Council. On 18th October 2005 the EC contacted that local authority and established that Mr Bown had not been on its electoral register since 2004. On 24th October 2005 the EC passed that information to Mr Smith, then treasurer of UKIP, who said that Mr Bown had been using forwarding addresses and promised an email with Mr Bown's registered address. On 28th October 2005, in response to a further telephone call from the EC, Mr Smith said that Mr Bown was away, and that he had not been able to obtain the address at which Mr Bown was recorded on the electoral register, but that he believed Mr Bown had been on the register when donations were made. Mr Smith maintained that position for a time, and then on 15th November 2005 provided an address in Broadstairs at which he said that Mr Bown was registered as an elector. The EC already knew from Thanet District Council that he was not registered at that address, but UKIP continued to assert that he was registered at that address at the meeting held on 13th December 2005. Mr Smith also said that he did not personally check the electoral register. He relied on others at the local level knowing whether or not donors were registered.
  17. There was also evidence which we were invited to consider as to the size and resources of UKIP. It is not a large political party, although said to be now the fourth largest in England. At the material time it had the equivalent of four full-time staff, and even the treasurer only worked part-time. It was not in receipt of government funding, and in the early summer of 2005 was much pre-occupied with the general election held in June 2005. At the time of the hearing in the Magistrates' Court UKIP's cash account held only a sum of under 10,000.
  18. The Neill Committee Report

  19. It is common ground between the parties that when deciding how to interpret and apply the discretionary power to forfeit, granted by s.58(2), a court cannot simply look at the words used. Those words must be construed having proper regard to the policy and objects of the statute see Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 and R v Tower Hamlets LBC ex parte Chetnik Developments Ltd [1988] 1AC 858, in which Lord Bridge said at 873G:-
  20. ". . . Before deciding whether a discretion has been exercised for good or bad reasons, the court must first construe the enactment by which the discretion is conferred. Some statutory discretions may be so wide that they can, for practical purposes, only be challenged if shown to have been exercised irrationally or in bad faith. But if the purpose which the discretion is intended to serve is clear, the discretion can only be validly exercised for reasons relevant to the achievement of that purpose."

    In the present case it is said, and I would accept, that in order to discover the policy and objects of the statute it is helpful to look at its legislative history, beginning with the Neill Committee Report and going on to consider the White Paper and then the statute, but noting the significant changes made on the way.

  21. The Neill Committee considered the whole question of funding political parties. It recommended in chapter 4 disclosure and reporting of all larger donations, including donations in kind, monitored by the EC. Then in chapter 5 it considered whether political parties should accept foreign donations, and recommended as follows (I retain the numbers used in the report):
  22. "24. Political parties should in principle be banned from receiving foreign donations."

    but it was difficult to find a foreign donation so

    "25. Political donations should be receivable by political parties only if originating from a permissible source (as defined).
    26. The definition of a permissible source should cover:
    As to individuals: registered UK voters and those entitled to register as UK voters . . .
    28. The responsibility for ensuring that donations are received only from a permissible source should be placed on each political party. . .
    31. Criminal sanctions should attach to a deliberate acceptance of a donation from a source falling outside the definition of a permissible source. There should be a power for the court to order a defaulting political party to forfeit a sum of up to ten times the donation wrongfully accepted."
  23. Recommendation 31 is a distillation of paragraph 5.42 of the Report, which is worth quoting in full:-
  24. "In essence, what we said in chapter 4 at paragraphs 4.60 and 4.61 should apply here too with necessary modifications. Thus, the Election Commission will have statutory powers to call for information and to institute an investigation into any donation which it suspects has not come from a permissible source. If a party were to be guilty of the deliberate acceptance of a donation from a source outside the definition of a permissible source, criminal sanctions should attach to all responsible, and a sum no less than the donation should be liable to forfeiture from the party's funds; in significant cases of attempted evasion of the rules a penalty of up to ten times the overspend might be levied. A forfeiture power should also apply even if the receipt were innocent or inadvertent, although the courts would clearly take into account the degree of culpability in setting the level of forfeiture."
  25. Paragraphs 4.60 and 4.61 are the enforcement recommendations in relation to the reporting of donations, and part of paragraph 4.61 reads:-
  26. "The reporting obligations of the political parties should be backed by criminal sanctions. These should be so drafted as to distinguish between inadvertent and a deliberate failure to report a disclosable donation. In the latter case those responsible should be fined or imprisoned. In both cases the courts would have power to order the defaulting party to forfeit a sum not exceeding the unreported donation."
  27. The only other paragraph in the Neill Committee Report to which I need refer is paragraph 2.34 in which the committee says:-
  28. "We wish to emphasise that our recommendations have been conceived as part of an overall integrated scheme for the reform of the funding of political parties. There is a direct linkage between all the recommendations, which should be viewed as a whole."
  29. As often happens, the warning against "cherry-picking" was not heeded in full.
  30. The White Paper

  31. The White Paper prepared on 27th July 1999 in response to the Neill Committee Report accepted much of what had been recommended. The Government had earlier indicated that it favoured a ban on foreign donations, and wanted open declarations in relation to donations of 5,000 or more. At paragraph 1.5 in its introductory overview it said:-
  32. "The Government agrees that a regulatory scheme of some rigour is needed to enable the restrictions to be enforced . . . The Government's proposals follow the Neill Committee Report in using the concept of an "impermissible source". The principle target is to require political parties to reject donations which are anonymous or which do not appear to be either from a person registered to vote in the United Kingdom or from a company . . ."
  33. In Chapter 2 the White Paper dealt with the EC and at paragraph 2.4 it said:-
  34. "The bedrock functions of the Electoral Commission, as recommended by the Neill Committee, will be those relating to the new regulatory framework for the reporting of donations to political parties, the ban on foreign donations and the controls on campaign expenditure at parliamentary and other elections."

    Mr Alan Newman QC for UKIP pointed to that paragraph as showing that the banning of foreign donations was at the heart of the Government's proposals.

  35. In Chapter 4 the White Paper dealt with "Sources of Funding" and said at paragraph 4.2:-
  36. "The Neill Committee recognised that a key difficulty in seeking to ban foreign donations was the problem of defining a foreign source for the purposes of such a ban. Any such definition would inevitably be hedged around with a multitude of exceptions. The Committee concluded that this difficulty could effectively be overcome by defining those sources from which political parties should be entitled to receive donations. They therefore recommended that donations should be receivable by political parties only if they originate from a "permissible source", defined in such a way as to exclude foreign funding. Part IV of the draft Bill adopts this suggested approach."
  37. In paragraphs 4.5 and 4.6 the White Paper dealt with individuals as permissible sources of funds, saying:-
  38. "4.5 The Neill Committee recommended that political parties should be able to receive donations both from those who are registered voters in the United Kingdom and from those who are entitled to register to vote in the United Kingdom. Clause 50(2)(a) departs from this recommendation by providing that registered political parties may accept donations only from those individuals who appear on the electoral register. Entitlement to register, whether as a resident or overseas elector, will not qualify an individual as a permissible source.
    4.6 Checking that a particular donor appears on the electoral register offers a test that is both conclusive and simple to administer. It would be far less straightforward for political parties to verify that a donor not appearing on the register was nevertheless entitled to do so. It is in the interests of the parties to have available a test which offers certainty as to the eligibility of the donor . . ."
  39. At paragraph 4.13 the White Paper turned to enforcement of the ban on foreign donations, saying:-
  40. "4.13 The Neill Committee proposed that criminal sanctions should attach to the deliberate acceptance of a donation from a source outside the definition of a permissible source . . .
    4.14 As the Neill Committee recommended, the Government also proposes that it should be a criminal offence to attempt to evade the restrictions on the source of political parties' funds . .
    4.15 In addition to theses criminal sanctions the Government also accepts the Committee's proposal that where a party is found to have accepted a donation from other than a permissible source it should be liable to forfeit that sum. Clause 51 provides a power for a Magistrates' Court . . . to order the forfeiture of a sum equal to the value of a donation received from other than a permissible source. This will apply whether such a donation was accepted knowingly or not. Under Clause 51(2) it will be for the Electoral Commission to make an application to the court for a civil forfeiture order."

    PPERA

  41. The first three parts of the Act deal with the EC, the registration of political parties and the accounting requirements for political parties. Part IV deals with Control of Donations to Registered Parties and their Members etc, and that Part begins with chapter 1, section 50(2) of which provides that "donation" in relation to a registered party means any gift to the party of money or other property.
  42. S.52(2)(b) enables donations of less than 200 to be disregarded, and that brings me to chapter II, entitled "Restrictions on Donations to Registered Parties", which contains the provisions which are at the heart of this case.
  43. S.54 deals with Permissible Donations. It begins
  44. "(1) a donation received by a registered party must not be accepted by the party if -
    (a) the person by whom the donation would be made is not, at the time of its receipt by the party, a permissible donor; or
    (b) the party is (whether because the donation is given anonymously or by reason of any deception or concealment or otherwise) unable to ascertain the identity of that person.
    (2) For the purposes of this Part the following are permissible donors
    a) an individual registered in an electoral register;"
  45. The section goes on to deal with donors who are not individuals, and an electoral register is defined in s.54(8). S.55 deals with types of payments with which we are not concerned, but s.56 is important. It deals with acceptance or return of donations and, so far as relevant, it provides that
  46. "(1) Where
    (a) a donation is received by a registered party and
    (b) it is not immediately decided that the party should (for whatever reason) refuse the donation,
    all reasonable steps must be taken forthwith by or on behalf of the party to verify (or, so far as any of the following is not apparent, ascertain) the identity of the donor, whether he is a permissible donor, and (if that appears to be the case) all such details in respect of him as are required by virtue of paragraph 2 of Schedule 6 to be given in respect of the donor of a recordable donation."
  47. Paragraph 2 of Schedule 6 deals with the information required by a party for its quarterly Donation Reports in the case of an individual his full name, and his address as shown in the electoral register, together with (if it be different) his home address. Returning to s.56, that section continues
  48. "(2) If a registered party receives a donation which it is prohibited from accepting by virtue of s.54(1), or which it is decided that the party should for any other reason refuse, then
    (a) unless the donation falls within s.54(1)(b) (which deals with unidentified donors) the donation, or a payment of an equivalent amount, must be sent back to the person who made the donation or any person appearing to be acing on his behalf.
    (b) . . .
    within the period of 30 days beginning with the date when the donation is received by the party.
    (3) Where -
    (a) subsection (2)(a) applies in relation to a donation, and
    (b) the donation is not dealt with in accordance with that provision, the party and the treasurer of the party are each guilty of an offence.
    (4) . . .
    (5) For the purposes of this Part, a donation received by a registered party shall be taken to have been accepted by the party unless
    (a) the steps mentioned in paragraph (a) or (b) of subsection (2) are taken in relation to the donation within the period of 30 days mentioned in that subsection; and
    (b) a record can be produced of the receipt of the donation and
    (i) of the return of the donation, or the equivalent amount, as mentioned in subsection (2)(a) . . ."
  49. S.57 deals with the return of donations to unidentified owners and s.58 deals with forfeiture of certain donations. Although s.58(2) is quoted above, it is convenient to repeat it here
  50. "(1) This section applies to any donation received by a registered party
    (a) which by virtue of s.54(1)(a) or (b) the party are prohibited from accepting, but
    (b) which has been accepted by the party.
    (2) The court may, on an application made by the Commission, order the forfeiture by the party of an amount equal to the value of the donation.
    (3) The standard of proof in proceedings for an application under this section shall be that applicable to civil proceedings.
    (4) An order may be made under this section whether or not proceedings are brought against any person for an offence connected with the donation.
    (5) In this section "the court" means
    (a) in relation to England and Wales, a Magistrates' Court;"
  51. S.59 enables a registered party, but not the EC, to appeal to the Crown Court.
  52. S.62 makes it an offence deliberately to evade restrictions on donations and Chapter III then deals with the duty of registered parties to report donations received. The party treasurer has to deliver the report on time to the EC, and s.55 makes it an offence, subject to a defence of due diligence, for him to fail to do so. Then s.65(6) provides
  53. "Where the court is satisfied, on an application made by the Commission, that any failure to comply with any such requirements in relation to any donation to a registered party was attributable to an intention on the part of any person to conceal the existence or true amount of the donation, the court may order the forfeiture by the party of an amount equal to the value of the donation."

    The provision is different from that in s.58(2) in that, as Mr Beloff QC for the EC points out, it expressly requires proof of intent to conceal.

    Comment on the legislative history

  54. Clearly the Neill Committee decided that it was appropriate to ban foreign donations, but because they could not be satisfactorily defined the Committee approached the problem from the other end. It decided to recommend that donations should only be received from a permissible source. In the case of individuals, those on the electoral register and those entitled to registration. Parliament accepted the general approach, but restricted entitlement to registered electors, because entitlement would then be easier to check, and those entitled to registration could easily take the steps necessary to obtain registration. That was quite a significant change.
  55. Even more significant was the change in relation to the forfeiture proposals. The Neill Committee recommended that for deliberate acceptance of a donation from an impermissible source there should be liability to forfeiture of a sum "not less than the donation" from the receiving party's funds. In significant cases of attempted evasion of the rules the penalty levied could be up to ten times the overspend. It was envisaged that the forfeiture power would be available even if the receipt were innocent or inadvertent, but "the courts would clearly take into account the degree of culpability in setting the level of forfeiture".
  56. I am inclined to agree with Mr Newman that the Neill Committee probably envisaged courts having quite a wide discretion in relation to forfeiture, but in the White Paper and in the statute the position changed. The proposal that there should be power to forfeit an amount greater than that received was abandoned without explanation, but paragraph 4.15 of the White Paper clearly envisaged a power to order forfeiture of a sum equivalent to all that had been received ("that sum") whether the sum was accepted knowingly or not.
  57. Mr Newman invited us to look at an answer given by the then Secretary of State for the Home Department when the Bill was proceeding through parliament, and the Explanatory Notes produced when the statute was published. We looked de bene esse but neither document assists in relation to the matters with which we are concerned.
  58. In the Administrative Court

  59. In a careful judgment, which was handed down on 5th February 2009, Walker J began with a summary of his general conclusions, many of which are not now controversial, and which I can therefore abbreviate, with some changing of numbers
  60. (1) One of the aims of PPERA as a whole is to enhance and maintain the integrity and propriety of and public confidence in the political process.
    (2) A motive for many of the provisions found in part IV, including sections 54-60 is the undesirability of foreign donations.
    (3) Practical considerations led Parliament to reject a recommendation (in the Neill Report) that mere entitlement to be on an electoral register should qualify an individual to be a permissible donor. Instead, as regards individuals, Parliament adopted a policy that there should be a ban on donations by those not on an electoral register.
    (4) The purpose of s.54 is to give effect to that policy by (1) prohibiting parties from accepting donations from those who are not, at the time of receipt by the party, permissible donors and (2) defining an individual as a permissible donor only if that individual is registered on an electoral register. The main purpose of the forfeiture power in s.58(2) is to provide a method of enforcing s.54. It also seeks to deter future breaches of s.54, whether by the party in question or by others.
    (5) Where a Magistrates Court finds that a donation has been accepted from someone who is not a permissible donor it must consider whether to make a forfeiture order, bearing in mind that its task is to advance and not to frustrate the policy and objects of PPERA and, in relation to donations by individuals, the specific purpose of s.54.

    More controversially the judge continued

    (6) There is no presumption in favour of forfeiture;
    (7) In construing s.58(2) regard must be had to the common law principle that a statute should not be construed so as to interfere with property rights unless it is clearly intended to do so.
    (8) In relation to any one donation the power under s.58(2) is all or nothing.

    That conclusion has not been the subject of challenge in this court.

    (9) Potentially relevant factors include
    (a) the type and degree of harm caused by the breach of s54.(1). Has the party got a benefit it should never have had? Is the donor foreign?
    (b) the extent to which the party's action or inaction deserves blame. Did the party know at the time that the donation was impermissible? If not, should it have known? Have there been previous or related transgressions? If so, what happened?
    (c) concerns as to what may happen in the future. Is it desirable as a deterrent to order forfeiture even after return of a donation by the party?
    (d) the stance and current position of the party. Did the party promptly admit its error and take remedial steps? That could militate against forfeiture, but every registered party of whatever size ought to ensure that its resources are deployed so as to fulfil its obligations under PPERA.
    (10) Although defective, the decision of the SDJ was not shown to be irrational.
    (11) The Magistrates' Court should give reasons, and, as is now accepted, the reasons given by the SDJ were inadequate.
  61. The judge ordered that the decision of the SDJ be quashed, and in relation to that order there is no appeal. He also ordered that the application for an order of forfeiture be remitted to the Magistrates Court for reconsideration in accordance with the terms of his judgment, with no order as to costs. The reason for this appeal is that the EC contends that conclusions reached by the judge as to the proper approach to s.58(2) were mistaken, and the mistakes must be corrected before the matter returns to the Magistrates' Court.
  62. Submissions and Conclusions

  63. The core submission made by Mr Beloff on behalf of the EC is that once it is shown that a donation has been accepted in breach of s.54, that is to say from an impermissible donor, and has not been returned as envisaged by s.56, then a Magistrates Court should, if asked to do so, in almost every case exercise its power under s.58(2) by ordering forfeiture of an amount equal to the value of the donation. In other words there is, Mr Beloff submits, a presumption in favour of forfeiture. Although the submission was made to the SDJ he did not address it. By implication he rejected it, and Walker J did so expressly. Mr Newman contends that they were right to do so. He submits that the word "may" in s.58(2) gave the SDJ an unfettered discretion.
  64. In supporting his core submission Mr Beloff points to the fact that any donation received from an impermissible donor is a donation which, from the outset, the party should never have received, and which, pursuant to s.56, it should have returned. The enquiries envisaged by s.56 are not difficult or expensive. Once a donor provides the address at which he or she is recorded on an electoral register that can be checked by looking at the appropriate register, and registered political parties are entitled to free copies of registers in hard copy and in electronic form (Representation of the People (England and Wales) Regulation 2001, Regulations 102 and 106). In fact UKIP made no check in relation to Mr Bown at any time when he was unregistered. Parliament apparently accepted the proposition in the White Paper that a regulatory scheme of some rigour was needed to enable the restrictions on permissible donors to be enforced, the principal aim being to require political parties to reject donations from persons not registered to vote in the UK. If such a donation is accepted, then the party and the treasurer of the party are each guilty of an offence for which a term of imprisonment can be imposed, and the wording of s.56(3) which creates that offence, does not expressly require proof of intent, unlike, for example, the wording of s.65(6) which enables forfeiture to be ordered where, in a donation report, the existence or amount of a donation has been deliberately concealed.
  65. It would seem that in the present case the EC could have commenced criminal proceedings alleging a breach of s.56(3), but Parliament clearly gave it the alternative, less draconian, power to seek forfeiture by civil proceedings, which it could use to ensure that parties comply with their obligations under the Act. If courts do not in most cases order forfeiture when such an order is sought then there is no sanction. A party can simply, with impunity, retain a donation, however large or small, which it should never have received, and other parties which comply with the statutory requirements are disadvantaged.
  66. Furthermore, the Act is carefully structured to avoid injustice. The donor has chosen to make a gift so he cannot expect it to be returned. The party has thirty days to check that the donor is a permissible donor, and if after that period an order is made for it to forfeit to the state an amount equal to the value of the donation, that is only ensuring that it does not have the benefit of a donation which it should never have retained. The only loser would be the donor, whose donation would not be used as he intended, but he can be protected by the party doing as the Act requires. In addition he can protect himself by ensuring that he is a permissible donor.
  67. In the present case, as Mr Beloff points out, there were aggravating features which the SDJ seems to have overlooked. Despite its experience in relation to the Hayward donation in 2001 UKIP subsequently altered its internal donation report so as to deprive itself of valuable information from each donor as to his or her registered electoral address, thus rendering it more difficult to check electoral registration. Thus it ill-becomes UKIP now to say that the checking process could be difficult because hard copies were bulky and electronic information was not always in the same form. UKIP admits that it made no attempt to check the electoral register in relation to Mr Bown between 1st December 2004 and 1st February 2006 despite a stream of enquiries from the EC, the first of which was received on 19th April 2005, long before the flow of accepted donations ceased, and no donations were returned at any stage before the hearing in the Magistrates' Court.
  68. Mr Newman accepts that, in accordance with the principle set out in Padfield and Chetnick (supra), the SDJ was required to exercise the discretion granted by s.58(2) having regard to the purposes of the statute and in particular Part IV of the statute, but he submits that nevertheless the discretion was not really constrained. Any order for forfeiture of an amount equal to the value of a donation would necessarily impinge upon the property rights of the party concerned, so, bearing in mind the provisions of Article 1 of Protocol 1 to the European Convention on Human Rights, the SDJ had to be satisfied that the order sought would be in the public interest, proportionate and legally certain. Mr Newman concedes that two of those requirements were satisfied, but he submits that the SDJ was entitled to find that the order sought was not proportionate. It was, he submits, important in this case to have regard to the fact that Mr Bown was not a foreign donor, because the object of Part IV of the Act was to stop foreign donations. He was a donor who could have been, and thought he was, on an electoral roll when each donation was made. Having regard to the findings of fact it can be said that when each donation was accepted UKIP was unaware that Mr Bown was not a registered elector, and that is understandable because UKIP had limited resources to devote to checking. Furthermore, by the time that the matter reached the Magistrates Court UKIP was in no position to pay the cumulative amount sought. The donations had not been squandered, but simply used for normal political purposes, and if UKIP were to be ordered to forfeit that amount it might not only bankrupt the party but also have a chilling effect on the whole electoral landscape. That was something which it was right for the SDJ to bear in mind, having regard to the requirements of Article 3 of Protocol 1 to the Convention, which requires free elections at reasonable intervals "under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature".
  69. I propose to deal with each of the points made by Mr Newman starting with the purpose of Part IV of the statute. I accept that the Neill Committee began by considering how to stop foreign donations, but it (and the White Paper) concluded that could only be done by identifying permissible donors by reference to UK electoral rolls, and Parliament made the test easier by requiring registration at the time of the acceptance of the givt. That inevitably meant that some donations which could not possibly be described as foreign would, if accepted, fail the test, but it was that test set out in sections 54 and 56 which s.58(2) and the criminal provisions in s.56, were designed to enforce. Unless the normal consequence of an impermissible donation being brought to the attention of the court is an order for forfeiture of an amount equivalent to the value of a donation, parties are in reality free to disregard the provisions of s.54 and s.56 with impunity, and I struggle to see how such an order can be described as disproportionate, when by statute it is restricted to the value of the donation, a donation which should never have been accepted if the party had done what the law requires.
  70. Parliament having decided that the test of acceptability of a donation from an individual should be whether that individual was registered in an electoral register, it seems to me to be irrelevant whether an impermissible donor is or is not making a foreign donation (if such a donation could in fact be defined). It is precisely because a foreign donation cannot easily be defined that Parliament chose a totally different approach, and Magistrates' Courts should not, in my view, be seduced into ignoring the wording of s.54 and attempting to resurrect a test which, for good reason, the Neill Committee and Parliament did not adopt.
  71. Similar considerations are relevant when it is said that the impermissible donor had previously been on a electoral register, and could have registered and thought that he was registered at the time when he made the donation. The Neill Committee recommended that such a person would be a permissible donor but parliament, for clear reasons set out in the White Paper, rejected that recommendation. A Magistrates Court is not entitled by the back door to restore the recommendation which Parliament decided to reject.
  72. The fact that UKIP accepted donations from Mr Bown without realising that he was no longer in an electoral register is also, to my mind, immaterial. It is clear from the Neill Committee Report, the White Paper and the wording of the statute that a forfeiture order can be made in such circumstances. As Mr Beloff pointed out, that is not surprising because a party knows what it should do, and has readily available the means of testing whether a donation is permissible. The law cannot be expected to favour those who, for whatever reason, choose not to test. Any other approach would penalise those who devote some of their resources to good housekeeping.
  73. That brings me, finally, to the relevance of party resources. Nothing in the statute suggests that any registered party, however small, can be excused the obligation set out in s.56(1). When it receives the donation it must take all reasonable steps forthwith to check that the donor is a permissible donor. UKIP admits that it failed to do so. A small party with only a part-time staff may not be able to check at once, but sub-sections (2) and (5) of s.56 allow thirty days during which the donation can be returned before it is regarded as having been accepted. But is it relevant to have regard to resources when a forfeiture order is sought? There may, as in the present case, have been many donations, some in money, others made by discharging liabilities on behalf of the party, and the party may no longer be in a position to pay an amount equal to the value of all of the donations. On the other hand, the acceptance of every single donation was illegal, and to the full extent of the value of the donation it represents an advantage which the party should not have enjoyed. If Parliament had wanted to allow a party to retain some of the fruits of its illegal actions it could have said so in s.58(2) possibly by indicating that an order could be made for less than the value of the donation when the party was not in the position to pay more. But it did not do so, and it is very easy to see why. This Act was intended to set out a clear and readily enforceable system to ensure that all donations would come from permissible donors. If it were necessary to investigate the state of a party's finances before making an order pursuant to s.58(2) the sanction would be unwieldy and relatively easy to avoid or curtail. I am unmoved by the submission that the normal operation of s.58(2) may have a chilling effect on small parties, and thus curtail the freedom of the democratic process. As already pointed out, no party, however small, need ever put itself in jeopardy of an order under s.58(2) if it proceeds as envisaged by s.56.
  74. What then is the scope of the discretion granted by s.58(2)? Properly considered in the context of this statute it seems to me to be narrow. As Mr Beloff accepted, it might assist a party which, for reasons beyond its control, such as illness of staff, was unable to complete its enquiries within thirty days, or a party which was misled by an inaccurate entry in an electoral register. Maybe there would also be room for the exercise of discretion if a donation or its value were to be returned to the donor out of time but before any forfeiture was sought, because Parliament clearly did not intend a party to surrender the value of a donation more than once. But in the present case I can detect nothing which would entitle the Magistrates' Court not to make the forfeiture order which the EC seeks. Reverting to the grounds on which judicial review was sought, I am satisfied that the SDJ erred in his construction of PPERA. His refusal to order forfeiture of an amount equal to the value of each of the donations was not a valid exercise of the discretion under s.58(2) and, as Walker J found, his reasons were inadequate. In other words the decision was irrational, and Walker J was right to order that it be quashed. As to paragraphs 2 and 3 of his order, I would substitute for those paragraphs an order that this matter be remitted to the City of Westminster Magistrates' Court for that court to reconsider the EC's application, and to reach a decision in accordance with the judgment of this court. Whether the matter is dealt with by the SDJ or someone else seems to me to be something which can be left to the Magistrates' Court to decide.
  75. Lord Justice Goldring :

  76. I agree.
  77. Lord Justice Waller :

  78. I also agree.


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URL: http://www.bailii.org/ew/cases/EWCA/Civ/2009/1078.html